Student loans often offer special terms and provisions that make them a more affordable and manageable commitment for young college-bound students. These options are detailed below, including information on the different kinds of loans, when the student can borrow, and how to calculate your student loan repayment.
Student loans and interest rates
The interest rate on your federal student loans is fixed by law. Although the interest rate can vary slightly from one year to the next, the federal government pays the same rate on all student loans issued to U.S. citizens, residents, and green-card holders. This interest rate is called the “on-time” interest rate. The federal government will never reduce the interest rate below what it was when you took out the loan. In other words, if you take out a federal student loan for college, you’ll have to pay that rate no matter how long it takes you to pay it off.
The federal government will not raise your loan’s interest rate at all if you take on a loan for graduate school, which is why it’s more important to be informed about the interest rates on your loan than to pay them on time.
Graduate students should consider student loan refinancing. Although refinancing can be beneficial, it does carry a bit more risk. It’s also a lot more expensive than paying the loan off in full. If you’re borrowing more than $57,500, a refinancing loan is usually your best bet.
Here are more graduate student repayment tips from the Consumer Financial Protection Bureau:
1. It’s better to have too little rather than too much debt.
2. If you have high interest loans, consider refinancing if you can afford it. If you are getting a degree to find a job and are struggling to repay, consider refinancing.
3. Consider refinancing when you have to make substantial payments.
4. If you are facing a foreclosure, be prepared to make up to $500 per month for at least 12 months to make up for any payments lost.
5. Refinance with a lender that takes a short-term, fixed-rate, money market loan to make up for the amount you can’t afford to pay each month.
6. Ask for a 5-year fixed-rate mortgage.
7. Refinance as your credit improves, there’s lots of help paying student loans online.
8. Avoid adjustable-rate mortgages.